Master Franchise Model - Sparkleminds

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Master Franchise Model
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Regional or area franchises, a master franchisee
is a special type of franchise agreement that
gives an entrepreneur the exclusive rights to
sell or open a given number of franchises in a
large Geographical area Stated another way, it
is the owning of the rights to develop a
franchise system within a territory.
The territory can be a metropolitan area, an
entire state, several states, or a whole
country. It is common for master franchises to
encompass an area containing millions of people.
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In these territories, the entrepreneur who
obtains the master franchise rights controls
where all franchise locations will be and how
many will be built however, the master
franchise agreement may specify the number and a
timetable for development. This system may be one
of the least known business ownership
opportunities available today. Role of Master
Franchisees The master franchise model allows
the entrepreneur to develop a large business
operation within a relatively short period with a
concept that has already been developed by the
franchisor. Entrepreneurs with the necessary
capital and management talent can experience
significant growth and value appreciation.
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• The investment in this type of franchise may be
  large, but the rewards can far exceed those of
  other franchise opportunities. This is usually a
  low-overhead business requiring few if any
  employees in the beginning. With hard work and
  the right franchise, the territory can be
  methodically built into a business worth
  millions of dollars.
• Increased Revenue Potential As a master
  franchisee, the methods of generating income are
  expanded versus a traditional franchise.
• In a traditional franchise, the business owner is
  generally only offering the product or service
  directly to the end-use customer such as in a
  retail outlet. With a master franchise, the
  entrepreneur enjoys several very important
  advantages
• When a master franchisee sells a franchise to a
  buyer in the territory, he/she receives a
  portion of that franchise fee. Some agreements
  allow the master to retain up to half of the net
  franchise fee.
• The master has the option of opening their
  additional franchise locations at a
  significantly reduced franchise fee.
• The master earns ongoing monthly royalties from
  the services performed or products sold in the
  territory. Once the master has set up the
  franchisee, he/she receives royalty income for
  the rest of the life of that franchise, usually
  2 to 4 of the franchisees volume every month.
• If real estate is involved with the franchisees
  location, often the master can become involved
  in the development of sites and receive other
  types of real estate-related income. This type
  of income is optional for the master franchisee.
• The Masters main responsibility will be to act
  as a business consultant to his/her franchisees
  and help them succeed in their own business.
• Master Franchise Mode

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• These are key characteristics of the typical
  master franchise
• Very few customers The masters customers are
  the franchisees. The master helps support a
  small number of franchisees who may own several
  franchise units each.
• Very few employees Typically a master franchisee
  will work without employees in the beginning and
  add staff as the business grows.
• Very little office space Many master franchises
  can get started on a home office and expand to
  an outside office as needed.
• Master franchisees can build equity in the
  business at a much faster rate than a normal
  business. Once a few franchises are sold or
  opened, the value of the business increases
  significantly. Not only does the master have an
  existing business with cash flow, but additional
  franchise opportunities to sell, which gives the
  entrepreneur a higher business valuation.
• Instead of the typical 2 to 3 times multiple of
  earnings for most business appraisals, a master
  franchise territory could average a valuation of
  between 4 to 5 times earnings.
• A master franchise entrepreneur doesnt need
  prior experience in a specific industry.
  Extensive industry-specific training and support
  from the corporate office are included in the
  initial investment. Skills Needed as a Master
  Franchisee
• Management or sales experience. Real-life
  experience owning or running a business is
  helpful. Sales and marketing experience can also
  be valuable.
• Good people skills. The master will be dealing
  with franchisees and will need to treat them
  like customers, which they are.

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• The ability and desire to follow a proven system.
  The right franchise system is fully developed
  for success. Dont invest in a master franchise
  unless you believe you can follow the companys
  system.
• Financially qualified. Franchise fees for a
  master franchisee will typically range from
  150,000 to 500,000 to invest in an exclusive
  area.
• In addition, an entrepreneur will need operating
  capital. Typical operating capital requirements
  will range from 25,000 to 200,000 depending on
  several variables. Not all franchisors offer
  master franchise agreements. And some that did
  in the past are now sold out.

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